Crude Prices Fall on Abundant Supplies and Dollar Strength

Today Markets UAEJanuary 1, 2026

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February WTI crude oil (CLG26) on Wednesday closed down -0.53 (-0.91%), and February RBOB gasoline (RBG26) closed down -0.0180 (-1.04%).

Crude oil and gasoline prices gave up an early advance and retreated on Wednesday on a mostly bearish weekly EIA inventory report. Also, Wednesday’s rally in the dollar index (DXY00) to a 1-week high was negative for energy prices. Persistent geopolitical risks from Venezuela, Nigeria, and Russia are limiting crude price losses. Also, expectations that OPEC+ will stick with plans to pause further crude production increases are supportive for crude prices.

Strength in Chinese crude demand is supportive for prices. According to Kpler data, China’s crude imports this month are set to increase by 10% m/m to a record 12.2 million bpd as it rebuilds its crude inventories.

Crude prices received support on Tuesday when several OPEC+ delegates said the group is expected to stick with plans to pause further supply hikes when it meets during a monthly video conference on Sunday.

Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least 7 days rose +15% w/w to 129.33 million bbl in the week ended December 26.

Oil prices also have support after the US last Thursday launched strikes on ISIS targets in Nigeria in a security and intelligence collaboration with the Nigerian government to combat rising terrorist attacks in the country. Nigeria is an OPEC member. Mr. Trump previously warned that the US would strike ISIS in Nigeria if the group did not stop killing Christians.

Oil prices have support from the US blockade of sanctioned oil tankers involved with Venezuelan oil shipments. The US Coast Guard forced the sanctioned oil tanker Bella 1 to turn away from Venezuela and head out into the Atlantic Ocean last week, according to a Bloomberg report. US forces have been shadowing the vessel as part of President Trump’s blockade. US forces wanted to board Bella 1 near Barbados on Sunday, but the ship instead moved back out into the Atlantic Ocean.

Ukrainian drone and missile attacks have targeted at least 28 Russian refineries over the past four months, limiting Russia’s crude oil export capabilities and reducing global oil supplies. Also, since the end of November, Ukraine has ramped up attacks on Russian tankers, with at least six tankers attacked by drones and missiles in the Baltic Sea. In addition, new US and EU sanctions on Russian oil companies, infrastructure, and tankers have curbed Russian oil exports.

Crude also garnered support after OPEC+ on November 30 said it would stick to its plan to pause production increases in Q1 of 2026. OPEC+ at its November 2 meeting announced that members would raise production by +137,000 bpd in December but will then pause the production hikes in Q1-2026 due to the emerging global oil surplus. The IEA in mid-October forecasted a record global oil surplus of 4.0 million bpd for 2026. OPEC+ is trying to restore all of the 2.2 million bpd production cut it made in early 2024, but still has another 1.2 million bpd of production left to restore. OPEC’s November crude production fell by -10,000 bpd to 29.09 million bpd.

Last month, OPEC revised its Q3 global oil market estimates from a deficit to a surplus, as US production exceeded expectations and OPEC also ramped up crude output. OPEC said it now sees a 500,000 bpd surplus in global oil markets in Q3, versus the previous month’s estimate for a -400,000 bpd deficit. Also, the EIA raised its 2025 US crude production estimate to 13.59 million bpd from 13.53 million bpd last month.

Wednesday’s weekly EIA report was mainly bearish for crude and products. EIA gasoline supplies rose +5.8 million bbl to an 8.5-month high, well above expectations of +1.95 million bbl. Also, EIA distillate stockpiles rose by +4.98 million bbl, a larger build than expectations of +1.55 million bbl. In addition, crude supplies at Cushing, the delivery point of WTI futures, rose by +543,000 bbl. On the positive side, EIA crude inventories unexpectedly fell by -1.93 million bbl, versus expectations of a +500,000 bbl build.

Wednesday’s EIA report showed that (1) US crude oil inventories as of December 26 were -3.0% below the seasonal 5-year average, (2) gasoline inventories were +1.9% above the seasonal 5-year average, and (3) distillate inventories were -3.7% below the 5-year seasonal average. US crude oil production in the week ending December 26 was unchanged at 13.827 million bpd, just below the record high of 13.862 million bpd from the week of November 7.

Baker Hughes reported Tuesday that the number of active US oil rigs in the week ended January 2 rose by +3 rigs to 412 rigs, recovering from the 4.25-year low of 406 rigs posted in the week ended December 19. Over the past 2.5 years, the number of US oil rigs has fallen sharply from the 5.5-year high of 627 rigs reported in December 2022.